China overtakes US as world's biggest car market

• 13.5m vehicles sold in China in 2009, 10.4m in US
• China sees 45% growth in car industry year-on-year

Police officers stand alongside brand new vehicles provided by local government to ensure public security over the New Year holidays during a handover ceremony in Taiyuan, Shanxi province. Photograph: Stringer Shanghai/Reuters
STRINGER SHANGHAI/REUTERS

China has overtaken the US to become the biggest car market in the world as government policy initiatives spur demand.

China sold more than 13.5m vehicles last year, the official Xinhua news agency said today, compared with 10.4m cars and light trucks sold in the US, the lowest level in 27 years.

The Chinese tally includes heavy vehicles but is still higher than that of the US after roughly 650,000 units of heavy trucks are deducted, according to Orient Securities, the Chinese brokerage.

China's market grew by 45% year-on-year in 2009, providing a rare glimmer of hope for the world's beleaguered car manufacturers, such as General Motors, Volkswagen and Toyota. Total industry sales fell 21% in the formerly dominant US market, and Volkswagen has said that China is now its biggest market.

"This is even better than anyone expected," said Rao Da, secretary general of the China Passenger Car Association, at a news conference in Shanghai.

China was not expected to exceed the US market until 2020 but the speed with which the recession affected consumers in the States combined with incentives from the Beijing government to help buyers accelerate the trend.

China's communist government cut sales taxes on smaller, fuel-efficient cars and spent $730m (£450m) on subsidies for buyers of larger cars, pickup trucks and minivans. Stimulus spending on building highways and other public works also helped to boost sales of trucks used in construction.

Rao said that car sales this year could grow by another 20% so long as China's economic recovery continued and oil prices remained stable.

Motor manufacturers are looking to first-time buyers in smaller Chinese cities to help drive sales as incomes outside the country's prosperous east coast rise.

"People there are getting richer and can afford cars. Younger people can work for two or three years and with the help of their parents can buy a car," Rao said. "Being able to afford a car in China is not so difficult any more. People with an average salary can afford to buy a car."